Netflix shares should jump roughly 40 percent in the next year, as more international subscribers than expected flock to its huge, diverse pipeline of programming, a key analyst predicted Wednesday,
Shares popped about 2 percent at $109.16 in early trade. In the last year, the stock has jumped about 60 percent.
“We do not believe studios will be able to starve Netflix of content at this point,” BTIG’s Rich Greenfield said in a note Wednesday. He added that studios are also under pressure as “bundling,” a practice that packages the desirable programming with the weak, continues to unravel. That makes it hard for studios to raise their licensing prices.
Netflix is most often evaluated against premium networks like Time Warner’s HBO, but it should really be compared to a pay-TV provider because its programming slate is deeper and and more diverse than a programmer, Greenfield said.
Netflix has a $5 billion budget for content this year. To put that in context, HBO spent just shy of $2 billion on programming in 2014.
And compared to pay-TV providers, Netflix is more nimble because it decides on a show-level what to make and reject, instead of having to buy into entire networks. Netflix also doesn’t trifle with live sports rights, some of the most expensive in the business. That makes Netflix a stronger bet than either a programmer or a TV distributor, Greenfield said.
“A global shift to on-demand streaming video, an increasingly diverse slate of programming that appeals to all members of a household and best-in-class technology is propelling” Netflix to add new customers and keep the ones its has, he said.
BTIG raised its price target on the stock to $150 and boosted its forecast for streaming subscriber additions this year to 19.9 million from 18.7 million. That included a trim on the estimate for new U.S. members, but greater expected growth in subscribers abroad more than made up for it.